The utility of embryonic stem cell (ESC)-based therapies to regenerate neural tissue will be an important treatment for neurological disorders such as Parkinson's disease and spinal injury. In embryos, neural tissue is generated through inhibition of BMP signaling; accordingly, BMP inhibitors promote neural differentiation of ESC. To clarify the role of BMPs in neural induction from stem cells, we study GDF3, an antagonistic BMP family member that expressed in ESC and the embryonic neural tube. We propose to examine GDF3 function through ESC gain-of-function experiments to study the role of GDF-3 in stem and neural cell fate determination, through loss-of-function analysis via creation of mouse knockouts, and through biochemical studies to determine the mechanism of GDF-3 action. We hypothesize that distinct doses of GDF-3 will support either the undifferentiated state of ESC or differentiation to neural tissue; that GDF-3 will be required for normal development and patterning of the neural tube and neural crest, and that GDF-3 functions through direct protein interactions with other BMPs. These results may help to allow the controlled differentiation of pluripotent cell types to specific neuronal lineages for use in clinical applications.